MARKET COMMENTARY
After three months of brutal spread volatility for CMBS, the market has begun to settle into a narrower, albeit higher, trading range. This should be modestly good news for CMBS loan originators, who can only operate effectively in a predictable trading environment. It did not come quickly enough however for either Citadel, which closed its newly-created CMBS group only 14 months after getting into the business, or for Credit Suisse, which announced last week that it is shutting down its CRE loan origination platform. With many CMBS lenders still licking their wounds, we expect that the number of genuinely active securitized lenders will be down to 6 - 10 major banks. Super senior bonds tightened this week to swaps + 380, in about 5bps from last week. New 10-year, full-proceeds securitized deals are being quoted at 5.75 6.00% with 30 year amortization. Interestingly, there is a growing opportunity to take advantage of liquidity in the floating rate market and swap to a fixed rate. One major bank is quoting 3, 5, 7 and 10-year floaters which, after being swapped, result in rates ranging from the mid-3s to the mid-5s. Sizing for these loans is in the range of 9-10% debt yields. According to RCA statistics, CRE sales volume has been declining in both Asia and Europe for the past 9 months, and volume in the U.S. turned down in the past three months. There has been some talk of trophy prices getting ahead of the market, but recent sales in several U.S. gateway markets suggest that investors are still comfortable paying a premium for the best assets and markets.
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RECENT DEALS/CLOSINGS/QUOTES DEBT
Asset Type Office Office Industrial Retail Retail Retail Retail Retail Office Retail - Mall Retail Retail Office Office Multifamily - Mezzanine Loan
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Type of Financing Fixed Fixed Floating Floating Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed
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Type of Lender Life Company Life Company Bank Bank Life Company Life Company Life Company Life Company CMBS Life Company Life Company Bank Life Company Life Company Debt Fund
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Rate/Return 4.75% 4.25% L + 300 L + 200 6.40% 5.35% 4.75% 5.50% 6.03% 4.79% 5.95% 5.40% 5.15% 4.25% 10.00%
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Loan-to-Value 65% 50% 65% 65% 60% 40% 55% 65% 70% 60% 65% 73% 65% 65% 85%
Term 10 years 10 years 3 years plus two 12-month ext. 5 years 15 years 10 years 10 years 10 years 5 years 12 years 10 years 10 years 10 years 5 years 5 years
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Amortization/Comments 25 year 5 Years IO IO 30 year 5 Years IO 20 year 30 year 30 year 30 year 30 year 25 year 30 year 2 Years IO 30 year IO
BASE RATES
October 24, 2011 30 Day LIBOR U.S. Treasury 5 Year 10 Year Swaps 5 Year 10 Year 0.25% 1.08% 2.21% 1.43% 2.40% Two Weeks Ago 0.24% 1.08% 2.10% Current Swap Spreads 0.35% 0.19% One Year Ago 0.26% 1.18% 2.59%
Cushman & Wakefield Sonnenblick Goldman has raised approximately $25 billion of capital from more than 125 capital sources for 270 transactions in the past five years. For more information on this report or on how we can assist your financing needs or hospitality or note sales, please contact any CWSG office or:
Christopher T. Moyer Associate (212) 841-9220 chris.moyer@cushwake.com
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